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Trump–Musk Feud Erupts: Subsidy Showdown and Tesla Stock Turmoil

General Report July 2, 2025
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  • In the tumultuous landscape of U.S. politics and corporate dynamics, the rupture between former President Donald Trump and Tesla CEO Elon Musk reached a significant peak in late June and early July 2025. Initially alliance-driven, their relationship began to show strains as Musk publicly condemned the Senate's decision to expedite the elimination of the $7, 500 electric vehicle tax credit, a pivotal financial benefit for Tesla. This criticism ignited a fierce reaction from Trump, culminating in threats to withdraw federal subsidies crucial to Musk's ventures. On July 2, 2025, the repercussions became visibly alarming: Tesla's shares plummeted by up to 10%, signaling mounting investor anxiety regarding the intersection of political tensions and Tesla’s economic health. As investors processed this unfolding drama, responses to Musk's political commentary and Trump's retaliatory statements led to swift movements in market sentiment, reflecting the volatile nature of public opinion in real-time. Strengthening this narrative, the background of Musk's earlier support for Trump turned into a complex interplay of regret and defiance as his company faced declining sales amid a deteriorating brand image linked to his political engagements.

  • Additionally, as the political landscape shifts, Musk's past commitment of a staggering $250 million to Trump's 2024 campaign now appears mired in introspection, suggesting a fundamental recalibration of priorities amid pressuring market conditions. The intertwined themes of decreasing demand and impending delivery forecasts have begun to shape not only Tesla's operational outlook but also investor confidence, with analysts predicting a period of turbulence stemming from this feud. With a significant year-over-year decrease anticipated in Tesla's Q2 deliveries and ongoing scrutiny from the Trump administration influencing market perceptions, the path forward for Tesla is complicated. The convergence of political turmoil and corporate strategy thus emerges as a salient theme, illuminating the precarious balance Musk must navigate between advocacy for his vision of sustainable energy and the backlash stemming from contentious governmental relations.

Origins of the Trump–Musk Rift

  • Musk's Early Critique of Trump’s Spending Bill

  • Elon Musk's relationship with former President Donald Trump began to fray in early June 2025, primarily due to Musk's vocal opposition to the Trump-supported spending bill, frequently referred to as the 'Big Beautiful Bill.' Musk took to his social media platform X to express his outrage, describing the bill as a 'disgusting abomination' and criticizing its potential to exacerbate the federal deficit and undermine funding for essential services. This unprecedented critique marked a significant departure from Musk's previous support for Trump, highlighting the growing tension between them. The fallout was visible as Tesla’s sales, particularly in key European markets like the UK and France, began to decline, reflecting the backlash against Musk's political positions.

  • Buyer’s Remorse Over 2024 Campaign Contribution

  • In late June 2025, news surfaced about Musk's growing buyer's remorse concerning his substantial 2024 campaign contribution to Trump's presidency, which reportedly totaled around $250 million. As Musk faced mounting pressure over Tesla's declining brand reputation and sales, he publicly began to reevaluate this financial support for Trump. Analysts noted that while Musk had once positioned himself as a kingmaker within the political landscape, his aggressive stance against Trump’s policies indicated a desperation to dissociate Tesla’s fortunes from the administration's increasingly controversial agendas, especially as public sentiment shifted against the Trump-backed legislative efforts.

  • Outrage at Accelerated EV Tax Credit Elimination

  • The rift deepened crisis after Musk condemned the U.S. Senate's action on June 28, 2025, to accelerate the elimination of the $7, 500 electric vehicle (EV) tax credit. This policy change was perceived as a direct threat to the EV industry's growth and was projected to undermine the affordability of Tesla vehicles. Musk's response to the elimination of the tax credit was particularly fierce, articulating concerns that it would devastate jobs and stifle innovation in the clean energy sector. His warnings painted a dire picture for both the future of Tesla and the broader EV market, as he claimed that such cuts were designed to favor traditional energy sectors over the burgeoning green technology fields, marking a significant ideological conflict with Trump’s policies.

Political and Regulatory Showdown

  • Trump’s Threat to Cut Federal Subsidies

  • In a marked escalation of tensions, President Donald Trump publicly threatened on July 2, 2025, to cut billions of dollars in federal subsidies that support Elon Musk's companies, including Tesla and SpaceX. This ultimatum comes on the heels of Musk's vocal criticism of Trump's tax-cut and spending bill, which has garnered significant attention due to its potential to eliminate the $7, 500 federal electric vehicle (EV) tax credit that has historically benefitted Tesla. Trump, reflecting on Musk’s past contributions and contracts, suggested that such actions could lead Musk to 'close up shop and head back home to South Africa.' This statement carries heavy implications, given that Musk's ventures have relied heavily on federal support, raising questions about the future viability of Tesla amid shifting political landscapes.

  • As articulated by Trump at the White House, the contention arises over legislative measures perceived to threaten Musk’s empire: 'He’s upset that he’s losing his EV mandate and… he’s very upset about things but he can lose a lot more than that.' The stakes are notably high for Musk, as his companies could suffer extensive financial repercussions should the administration proceed with subsidy cuts, particularly pertaining to Tesla's robotaxi and EV production initiatives. Analysts project that the elimination of these subsidies could potentially slash Tesla’s earnings by up to $1.2 billion in the upcoming fiscal year.

  • Deportation Remarks and Alliance Collapse

  • In an alarming turn, Trump's comments have also draped a layer of personal drama over the feud, with the president joking about the possibility of deportation for Musk, who has been a U.S. citizen since 2002. His remarks, made during a press briefing, suggested that 'We might have to put DOGE on Elon, ' referencing the Department of Government Efficiency (DOGE) that Musk once headed. This quip embodies the deteriorating relationship between the two figures who were once allies, a collapse that Musk has publicly acknowledged by indicating his willingness to escalate tensions further if provoked. Musk's social media retorts include suggestions of forming a new political party aimed at representing the discontent of centrist voters, further complicating his relationship with the Republican establishment.

  • Musk’s stance has evolved into a more adversarial position, characterizing the tax bill as a 'financial boondoggle' and committing to unseat lawmakers supporting it in the next election cycle. His threats to undermine Republican incumbents who back the legislation demonstrate a clear pivot toward aggressive political engagement, marking a stark departure from his previous alignment with Trump's agenda. As the fallout continues to unfold, political commentators have noted that the intertwining of Musk’s financial interests with his controversial political rhetoric poses unique challenges for his businesses.

  • Musk’s Retaliatory Public Responses

  • In response to Trump's belligerence, Musk has adopted a predictably unfiltered approach on social media, reaffirming his stance on the elimination of subsidies and emphasizing the overarching risks posed by government intervention in the private sector. Musk's post on X, stating 'I am literally saying cut it all. Now, ' starkly underlines his readiness to confront Trump head-on, despite the potential repercussions for Tesla’s operational stability. This attitude signals a growing divide as Musk seeks to reaffirm his autonomy in business decisions while navigating the political fallout.

  • While analysts largely remain apprehensive about the consequences of this feud, some, like Dan Ives of Wedbush Securities, suggest that Musk’s vocal resistance could invigorate a faction of voters dissatisfied with traditional party politics. However, this approach also risks alienating crucial centrist buyers who may view Musk’s rhetoric as divisive. As the market reacts, Tesla’s stock has already shown volatility, with shares dropping more than 5% amid mounting investor unease regarding the sustainability of Musk's political rhetoric juxtaposed against the need for stable sales and demand for the Tesla brand.

Market Fallout and Investor Sentiment

  • Tesla Shares Plunge Amid Feud

  • As of July 2, 2025, Tesla's shares have been notably affected by the ongoing public feud between CEO Elon Musk and former President Donald Trump. Following a recent escalation of rhetoric, including threats from Trump regarding federal subsidies, Tesla's stock price witnessed a significant drop. Reports indicate that shares fell over 7% just before the company was slated to report its second-quarter delivery figures, a continuation of a downward trajectory this year, where shares have plummeted by more than 20%. The tension has sparked investor fears of increasing scrutiny from the Trump administration that may adversely affect Musk's various business interests, particularly in the electric vehicle (EV) sector.

  • Market analysts have described the current situation as resembling a 'soap opera, ' where the intricacies of Musk and Trump's public spat complicate the financial outlook for Tesla. Concerns mount that the quest for federal subsidies crucial to Tesla's financial health could face challenges, as indicated by a recent commentary from Wedbush Securities analyst Dan Ives. This precarious relationship and the resulting investor sentiment constitute significant headwinds for Tesla’s stock amidst existing competition and weakening demand across vital markets.

  • Analyst Downgrades and Q2 Delivery Concerns

  • Analysts' expectations for Tesla's Q2 delivery report, due imminently, are tinged with caution, reflective of broader market sentiments influenced by the feud between Musk and Trump. Most analysts expect the automaker to report a year-over-year decline in deliveries, with estimates hovering around 387, 000 units, marking a sharp decrease from approximately 444, 000 during the same period last year. Key market pressures, including Musk's controversial ties and public statements concerning Trump’s proposed spending and tax legislation, have contributed to this pessimistic outlook.

  • Furthermore, with the launch of the robotaxi initiative in Austin, Texas, there were initial signs of hope that this move might bolster Tesla’s market position. However, as political tensions have intensified, many analysts are revising their delivery estimates downward, anticipating sales upheaval exacerbated by consumer backlash linked to Musk’s political alignment. Significant firms have updated their price targets, with some projecting substantial shortfalls, indicating considerable skepticism surrounding Tesla's ability to rebound from current operational challenges.

  • Stock Volatility and Broader Market Trends

  • The volatility surrounding Tesla's stock is a microcosm of the broader market trends impacting the EV sector. As of July 2, 2025, Tesla's stock is trading at approximately $300, reflecting uncertainties not only related to the Musk-Trump conflict but also heightened competition from rival automakers, particularly from China. This situation is compounded by anticipated challenges arising from proposed government restrictions aimed at EV subsidies, which could have lasting implications for Tesla’s profitability.

  • Analysts from various firms have expressed mixed sentiments, with some suggesting that a potential turnaround could emerge in the latter half of 2025, particularly if new models are introduced or if the public perception of Tesla improves. Nevertheless, investor focus remains sharply attuned to the unfolding political landscape, making Tesla's path forward increasingly complex. As highlighted by a recent report, the interconnections between corporate strategies and political matters are paramount, and the upcoming delivery figures will be crucial in shaping both investor attitudes and future stock performance.

Wrap Up

  • The escalating feud between President Trump and Elon Musk exemplifies the increasingly intricate relationship between U.S. politics and corporate fortunes as of July 2, 2025. Musk's adamant critiques of governmental fiscal policies have not only reignited tensions with Trump but also brought to the forefront significant financial implications for Tesla. With shares witnessing a stark decline up to 10%, analysts caution against potential further downturns if forthcoming subsidies are rescinded or operational challenges persist. It is anticipated that Musk may undertake a strategic reevaluation of his political stance, necessitating an assessment that aligns more closely with shareholder sensitivities while still pushing the envelope on innovation.

  • Looking ahead, the focus for investors and stakeholders will be on upcoming legislative changes, the evolving dynamics between the White House and Congress, and Tesla’s ability to successfully execute on product launches, including its ambitious Robotaxi initiative. The coming months will be critical as the corporation seeks to stabilize stock performance amidst a backdrop of fluctuating market sentiments and political volatility. As the interplay between Musk's business strategies and political engagements unfolds, one thing remains clear: the stakes are high, as the outcome of this rivalry could redefine market trajectories not only for Tesla but also for the broader electric vehicle sector moving into the second half of 2025.

Glossary

  • Tesla: An American electric vehicle (EV) and clean energy company founded by Elon Musk. As of July 2, 2025, Tesla is facing significant market challenges, exacerbated by political tensions and declining sales in key markets.
  • Elon Musk: CEO of Tesla and SpaceX, known for his advocacy of sustainable energy and his controversial political statements. As of July 2, 2025, Musk is embroiled in a public feud with former President Trump, impacting Tesla's market position and investor sentiment.
  • $7, 500 EV Tax Credit: A federal tax incentive aimed at promoting electric vehicle adoption. The recent decision by the U.S. Senate to accelerate its elimination is seen as detrimental to the EV industry and has fueled Musk's criticisms of Trump's policies.
  • Federal Subsidies: Financial assistance provided by the government to support various sectors, including the electric vehicle industry. On July 2, 2025, Trump threatened to cut subsidies crucial to Tesla's operations, which could lead to significant financial implications for the company.
  • Market Sentiment: The overall attitude of investors toward a particular security or market. Tesla's stock has displayed heightened volatility, reflecting negative sentiment amid the ongoing feud between Musk and Trump, particularly in response to potential regulatory changes.
  • Political Risk: The likelihood of financial, operational, or reputational loss due to political changes or instability. As of July 2, 2025, Tesla's exposure to political risk has intensified through Musk's public engagements and criticisms of the Trump administration.
  • Robotaxi: Tesla's initiative to develop autonomously driven taxi services. The project is intended to bolster Tesla's market position but is under scrutiny amid the larger discussions about regulatory changes impacting the EV sector as of July 2025.
  • Q2 Deliveries: The number of Tesla vehicles delivered in the second quarter of the year. Analysts predict a year-over-year decline, with anticipated figures around 387, 000 units for Q2 2025, reflecting broader market challenges and political tensions.
  • Stock Market: A system for buying and selling shares of public companies. Tesla's shares have faced significant fluctuations, dropping more than 20% in 2025, predominantly influenced by the corporate-political feud between Musk and Trump.
  • Feud: A prolonged conflict or dispute. The feud between Trump and Musk exemplifies the intersection of corporate interests and political dynamics, impacting Tesla's financial outlook as of July 2, 2025.
  • Tax Credit: A form of tax relief that allows individual taxpayers or businesses to subtract a specified amount from the total they owe to the government. The elimination of tax credits for electric vehicle purchases poses risks for Tesla's market viability.
  • Deportation Remarks: Comments made by Trump suggesting Musk could potentially face deportation, which have added a personal dimension to their political feud. As of July 2, 2025, such remarks underline the escalating tensions and alter Musk's public relationship with the administration.

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